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IMF Predicts Slowdown - 2001-12-19

The International Monetary Fund Tuesday predicted the world economy will grow next year at sluggish pace. The IMF, in the second post-September 11 revision to its economic outlook, says much of the 2.4 percent growth will come from emerging economies.

The IMF says the world economy is caught in a synchronized slowdown, only the fourth such downturn since 1975. There has been no comparable slump since the Gulf War-induced slowdown of 1991 when world output grew 1.5 and per capita income actually fell. IMF chief economist Kenneth Rogoff says the world's three biggest economies, the United States, Japan, and Germany, are in recession. Only China (7.3%), Russia (5.8%) and India (4.4%) continue to grow at a robust pace. According to Mr. Rogoff, there is particular uncertainty clouding future projections.

"We can imagine that there would be a better outcome, a much sharper recovery," said Mr. Rogoff. "And there are many reasons why you might think that is so. There are lower oil prices, there's a lot of policy stimulus in the pipeline, particularly lower interest rates."

But, he says, there is no consensus on how soon significant growth will return to North America, Germany and Japan, which collectively account for nearly half of world output. The IMF cautious in projecting only seven tenths of one percent growth next year in Germany and America and a full one percent decline in Japan. Despite the gloomy outlook, Mr. Rogoff has praise for U.S. central bank chief Alan Greenspan who has sought to promote a U.S. recovery by aggressively cutting interest rates over the past 11 months.

"I would compare Alan Greenspan as being to central bankers what Michael Jordan is to basketball," said Mr. Rogoff. "He may miss a shot or two now and then but when the game is on the line you would want him holding the ball. And I think the [U.S.] response really has been quite admirable."

The IMF believes the current downturn will be less severe than those that preceded it. Per capita incomes worldwide are projected to still grow this year and next and growth should accelerate to well above 3 percent in 2003.